Thursday, May 18, 2017

The Charles Schwab Guide to Finances After Fifty (Book Review/Notes)

This past week I checked out from the library The Charles Schwab Guide to Finances After Fifty by Carrie Schwab-Pomerantz.

This book has a lot of helpful ideas for people approaching retirement, who are retired, and planning for their estate. I wish I would have read the first section of this book well before turning 50. There are practical ideas in it for people as young as in their 20s.

The book is divided into six main sections:

- When Retirement is at least Ten Years Out
- Getting closer: Transitioning into Retirement
- Life in Retirement
- Maximizing Social Security and Medicare
- Estate Planning
- The People in My Life

Within each section, there are questions that act as chapters (e.g., I'm saving for retirement - but how much is enough? Should I be debt-free before I retire? Now that I'm retired, how should I manage my money to make it last?)

I focused on the first section (When Retirement is at Least Ten Years Out) since it had the most relevant information to where I am in my life. Below are some things I found useful:


How much should you be saving?

Age you start saving                                  % of salary you need to save
20s                                                              10-15%
30s                                                              15-25%
40s                                                              25-40%
50s                                                              40% or more


Where should your money go first

1. Contribute enough to your company retirement plan to take full advantage of your employer match.
2. Pay down high-interest consumer debt.
3. Build an emergency fund.
4. Maximize retirement savings.
5. Save for a child's education.
6. Save for a home.
7. Pay down other debt.
8. Keep investing.


Change your thinking. Make savings a part of your non-discretionary expenses. In fact, when you create your budget, put this at the top of the must-haves list.


Catch-up contributions do work. If you consistently put in the maximum amount to both a 401(k) and IRA and have about a 6% annual return, you could have over $500,000 by the time that you retire.


Comparison shop for long-term health care insurance. Check the quality of the insurer - financial strength, rating, and length of time in business. Then review the terms of the policy. Make sure you understand:

- What's covered: skilled nursing, custodial care, assisted living?
- Specifically whether Alzheimer's Disease is covered.
- Limitations on preexisting conditions.
- Maximum payouts and whether payments are adjusted for inflation.
- Lag time until benefits kick in.
- How long benefits will last.
- If there's a non-forfeiture benefit offering coverage even if you cancel the policy.
- Whether the current premiums are guaranteed in future years, or there are any constraints on future increases.
- How many times rates have increased in the past ten years - this is especially important.

Generally, between ages 50-65 is a the most cost-effective time to buy LTCI if you're in good health.

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